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Wall Street drops as worries offset upbeat data

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NEW YORK -- Stocks slid Friday as investors, securing positions before the second half of the year begins, sold off due to rising oil prices and lingering worries about subprime mortgage lending troubles.

The erratic day capped off a strong second quarter for Wall Street, which pushed the Dow Jones industrial average up more than 1,000 points over the last three months. The blue-chip index is up 7.59% for the year.

The stock market initially rose Friday, encouraged by Commerce Department data that fit well with the Federal Reserve's decision Thursday to keep interest rates level. Policymakers said the economy appeared to be growing moderately, but remained cautious about inflation, saying they awaited more evidence that costs were truly under control.

The latest batch of economic data showed that construction spending in May made its biggest jump in nearly 1-1/2 years, boosted by big government and commercial projects that offset the nation's weak residential market. The government also reported that consumer spending rose for the second month in a row, and that "core" prices, which strip out food and energy, moderated to 1.9% over the last 12 months -- the lowest year-over-year rate since 2004.

But the stock market couldn't hold onto gains. As investors prepared their portfolios for the launch of third-quarter trading next week, oil prices surged above $70 a barrel and jitters about subprime lending escalated.

"Oil's over $70, and that's going to worry some people," said Brian Gendreau, investment strategist for ING Investment Management. "And there's still a bit of a hangover from all these subprime problems. ... No one really knows the extent to which this is a serious problem or not."

Last week, Bear Stearns & Cos. had to bail out a hedge fund with investments tied to subprime loans. The stock fell nearly 3% Friday, and other financial companies followed.

According to preliminary calculations, the Dow Jones industrial average fell 13.17, or 0.10%, to 13,409, after swinging dramatically higher and lower over the course of the day.